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B Com Exam  >  B Com Tests  >  Test: Public Debt - 1 - B Com MCQ

Test: Public Debt - 1 - B Com MCQ


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10 Questions MCQ Test - Test: Public Debt - 1

Test: Public Debt - 1 for B Com 2024 is part of B Com preparation. The Test: Public Debt - 1 questions and answers have been prepared according to the B Com exam syllabus.The Test: Public Debt - 1 MCQs are made for B Com 2024 Exam. Find important definitions, questions, notes, meanings, examples, exercises, MCQs and online tests for Test: Public Debt - 1 below.
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Test: Public Debt - 1 - Question 1
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What does public debt refer to?

Detailed Solution for Test: Public Debt - 1 - Question 1
Public debt refers to the loans that the government takes from various sources to finance its activities when the current revenue falls short. It involves borrowing money to cover budget deficits and fund various projects.
Test: Public Debt - 1 - Question 2
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In India, which of the following items is NOT included in public debt?

Detailed Solution for Test: Public Debt - 1 - Question 2
Public debt in India includes market loans, special bearer bonds, treasury bills, and special loans among other items. Small savings are not considered part of public debt.
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Test: Public Debt - 1 - Question 3
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What is the primary objective of raising public debt to meet budget deficits?

Detailed Solution for Test: Public Debt - 1 - Question 3
Raising public debt to meet casual budget deficits helps avoid immediate changes in the tax system. If deficits are regular, the government should consider raising revenue through taxation or reducing expenditure.
Test: Public Debt - 1 - Question 4
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Which type of public debt is incurred to defray the expenses of war and extraordinary situations?
Detailed Solution for Test: Public Debt - 1 - Question 4
Public debt incurred to cover expenses of war and extraordinary situations is known as emergency debt. It is often used to manage unforeseen events and crises.
Test: Public Debt - 1 - Question 5
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What is the main burden of external debt on a country?
Detailed Solution for Test: Public Debt - 1 - Question 5
External debt requires repayment in foreign exchange, which reduces a nation's ability to meet domestic consumption needs. To service external debt, a country may need to generate export surpluses by limiting domestic consumption.
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Which problem arises due to public debt diverting capital from the private sector to the public sector?
Detailed Solution for Test: Public Debt - 1 - Question 6
When public debt diverts capital from the private sector to the public sector, it leads to crowding out. This can result in higher interest rates and reduced private investment, impacting economic growth.
Test: Public Debt - 1 - Question 7
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What does the debt-service ratio measure?
Detailed Solution for Test: Public Debt - 1 - Question 7
The debt-service ratio represents the repayment obligations of a country on its external debt as a percentage of its exports of goods and services. It reflects the burden of external debt on a nation's economy.
Test: Public Debt - 1 - Question 8
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What is the primary effect of a large public debt on an economy's growth?
Detailed Solution for Test: Public Debt - 1 - Question 8
A large public debt, by diverting capital from productive private to unproductive public sectors, can slow down an economy's growth. It reduces the resources available for private investment.
Test: Public Debt - 1 - Question 9
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What is the primary purpose of a sinking fund in public debt management?
Detailed Solution for Test: Public Debt - 1 - Question 9
A sinking fund is used to accumulate resources over time to ensure that there are sufficient funds available to repay the debt at its maturity. It helps manage the debt repayment process effectively.
Test: Public Debt - 1 - Question 10
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Which method of debt repayment involves the government paying off the debt in equal annual installments?
Detailed Solution for Test: Public Debt - 1 - Question 10
The method of debt repayment involving the government paying off the debt in equal annual installments is known as Terminal Annuity. It helps reduce the debt burden gradually over time.
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